5 Reasons to Consider a Home Equity Line of Credit (HELOC)

Your home is your most valuable asset and investment. One of the benefits of ownership is the ability to take a loan out against the equity your home has accrued. This is called a home equity line of credit.

Your home’s equity can be determined by finding the difference between the fair market value of the property and the outstanding balance of all liens on it (typically your mortgage).

Equity increases as property values go up and you pay down your mortgage balance. A home equity line of credit then can provide many benefits for those with good credit and a chunk of their mortgage paid off.

Consider the Following

1. You can use it for big purchases. A home equity line of credit, which uses your home as collateral, frees up a large sum of money when it’s most needed and fills in any gaps in savings that you might have. It’s best for big projects such as major home improvements, college education costs, debt consolidation, and even a dream vacation.
2. You can borrow any sum up to your credit limit. Don’t feel comfortable with the total amount for which you’ve been approved? No worries; you can often just borrow up to what you need.
3. You’re protected from exorbitant interest rates. You may even be able to deduct the interest from your income taxes.
4. Your repayment is at your own speed, provided you meet the minimum. Unlike a mortgage, which can stretch on for 15 to 30 years, the home equity line of credit usually has a payment span of roughly 15 years. Lenders may allow you to pay more than the minimum to pay down the principal each month to minimize the impact of the interest.
5. Once you pay down your line, you may have it available for further use when you need it. Need to replace your roof after a particularly tough hurricane season? Have unexpected medical costs? If your home equity line allows for renewal after repayment, you can utilize the line a second time to cover unexpected costs or future projects.